Defence options put Romania in the hot seat

Romania is reconsidering a planned €4.5bn jet fighter order to secure funds for other defence needs and please both the US and its European strategic partners, FT’s Thomas Escritt reports from Bucharest.

The former communist country (i.e. Romania), which belongs to the European Union and NATO and hosts a small US base, is under pressure to choose between US and European defence companies for the fighter contract - and to find money for helicopters and other equipment needed to support its contingents in Iraq and Afghanistan.

Last year, the country's National Defence Council authorised spending up to €4.5bn ($7bn, £3.5bn) on 48 fighters to replace its ageing fleet of Mig-21s, which will no longer be airworthy after 2011. Officials say three companies - Lockheed Martin of the US, Sweden's Gripen and the Eurofighter consortium - will be invited to place bids later this year, with a final decision not expected until after general elections, which are likely to take place in November.

But some defence officials say Romania no longer needs four squadrons of fighters. Officials are now looking at spending half the money on equipment such as helicopters, armoured personnel carriers and drones.

"We aren't so rich as to be able to buy everything our armed forces might need," Corneliu Dobritoiu, Romania's secretary of state for defence policy, said. There was a need to be selective, he said, adding that approximately half the budget available for fighter procurement could be spent on equipment to provide greater protection to soldiers in the field.

At the heart of the debate is a division between the country's government and president over Romania's strategic needs. Traian Basescu, an Atlanticist by temperament, is believed to favour the US contractor, while the government, led by Calin Popescu Tariceanu, is inclined towards Europe.

Sorin Ionita, research director at the Romanian Academic Society, a think-tank, said: "The president leans further in one direction, while the prime minister leans in the other direction. It's partly the result of their job descriptions: the president is responsible for foreign policy and security, where the government is in charge of domestic policy, 75 per cent of which is about European issues."

Mr Dobritoiu agreed that keeping both Romania's strategic partners happy would be a priority when the decision was taken. "We need to open ourselves in a balanced way to the two major markets . . . to cover the modernisation needs of the Romanian armed forces in a way to maximise its operational returns at the most costeffective prices in a way that pleases everybody.

"We need to make sure we can interoperate both with NATO and the EU."

Interoperability and training costs are a concern for the Romanian defence establishment, which would like to upgrade to the US-made Joint Strike Fighter. Similarities between the F-16 and JSF would mean less money would need to be spent on retraining and new weapons systems, while opting for the cheaper option of refurbished F-16s now would make it easier for the armed forces to secure a budget to upgrade to a more up-to-date aircraft later.

Lockheed Martin appears confident of its chances. Romanian law requires that military contractors offer industrial offsets of 80 per cent. In spite of this, when the US Department of Defense in April notified Congress of the possible sale of 48 F-16s to Romania for $4.5bn, it stated that the deal made no provision for offsets.

Gripen, which would charge less than €3bn for 48 fighters, is prepared to offer 100 per cent industrial offset. Eurofighter is also understood to be prepared to offer offsets for the refurbished Italian air force Eurofighters it proposes to provide.

Officials at the defence ministry are working on a proposal to buy two squadrons of refurbished Lockheed Martin F-16s. That would leave slightly more than €2bn for other battlefield support equipment that would be more useful in theatres such as Iraq and Afghanistan. These contracts could be awarded to European contractors.

Source: The Financial Times Limited, Jul 2, 2008